(Jan-27) The FED is expected to hold its key interest rate steady this week[29th of Jan]. After three consecutive rate cuts since September, the Fed is now in a “wait and see” mode, looking for more data indicating that inflation is cooling. The current rate is in the range of 4.25%[LB] - 4.50%[UB].
(Jan-28) The US dollar strengthened today against all Group-of-10 currencies after Trump announced plans for significantly larger universal tariffs than the 2.5% proposed by Treasury Secretary Scott Bessent. Trump indicated upcoming tariffs on foreign-produced semiconductors, pharmaceuticals, and certain metals to encourage domestic manufacturing. Consequently, copper prices fell amid concerns of potential trade wars due to the planned tariffs on metals like aluminum and steel.
(Jan-29) Gold prices could reach or approach record highs if the FED announces a dovish pause today. This outcome seems likely due to various factors, including ongoing trade tensions. Currently, gold prices are just above $2,763 per ounce.
(Jan-27) The market expects the ECB to cut its benchmark deposit rate by 25bps to 2.75% on Thursday[30th of Jan]. This would be the fourth consecutive rate cut as the ECB aims to support the eurozone economy and manage inflation.
(Jan-27) The SARB is expected to cut interest rates by 25bps this week[30th of Jan] following last weeks softer-than-expected inflation print. Currently repo is at 7.75%.
(Jan-28) The market has stabilized, and the rand has improved following the DA reaffirmation of their commitment to the GNU. This comes after weekend reports suggested instability within the GNU due to the President signing a new law facilitating state land expropriation.
(Jan-29) ZAR still under pressure until SARB announcement.
By sizwe Mfayela - Institutional Sales Specialist
(Jan-29)
Mozambique missed its 2024 revenue target by more than 10% following the post-election protests and unrest, which cost the economy c.$664mio in lost revenues. The state collected MZN 344.8bio ($5.4bio) in revenues.
President Daniel Chapo met with Total Energies CEO, Patrick Pouyanne to discuss the company’s projects in Mozambique. Pouyanne confirmed Total Energies’ commitment to resume a $20bio LNG project that has been suspended since 2021. President Chapo emphasised the government is making efforts to ensure the necessary stability for the project’s implementation.
By Thuto Mukena - Institutional Sales Specialist
(Jan-29) Yesterday’s session brought some late recovery for the ZAR following earlier losses. Initially, the Rand weakened to R18.8657/$ amid no new developments on Deepseek and the signing of the Expropriation Bill into law. These movements nudged 1-week realized volatility higher to trade close to the implied vol market. The unexpected nature of this week’s developments, particularly around the signing of the Expropriation Bill, helps explain why 1-week implied vol seems to have underpriced the risk premium for this week. Despite the narrowed 1-week volatility risk premium, options participants are still holding onto some event risk premium. The 1-week implied vol tenor is trading at a 0.54 vol premium over the 1-month tenor, reflecting the market’s caution over potential near-term surprises.
Implied volatility across both G10 and EM currencies edged lower in yesterday’s session as markets positioned ahead of the FOMC rate decision. USD/JPY 1-week implied vol led the decline, dropping 83bps from the open, while AUD/USD 1-week implied vol followed suit, easing by 18bps from opening levels. On the EM front, USD/TRY 1 week implied vol saw the most significant move, plunging by 538bps. USD/MXN 1-week implied vol also edged lower, dropping by 24bps from opening levels, as market anxiousness sees some cooling ahead of the rate decision. The FOMC first in line for this week, Fed Funds pricing low probability of a rate cut.